Reverse Donchian Channels for Trend-Following Signals

Summary

The document describes a modified Donchian channel that updates its boundaries using lows and highs in reversed roles. When price makes a low above the current upper boundary, the indicator raises that boundary and recalculates the lower one from recent highs. When price makes a high below the lower boundary, it resets the upper boundary from recent lows and moves the lower boundary to that high. The midpoint between the two boundaries is also returned.

The proposed use is trend following: a move beyond the upper boundary signals a long entry and short exit, while a move below the lower boundary signals a short entry and long exit. A single lookback period controls the recent extremes and can be adjusted for the trend size, volatility filtering, and chart timeframe. The document provides indicator logic but no performance tests, parameter-selection method, or risk controls; signals and results therefore remain unvalidated.

Key ideas

• The indicator reverses the usual roles of highs and lows in a Donchian channel.
• A low above the upper boundary triggers a long signal and updates the channel.
• A high below the lower boundary triggers a short signal and updates the channel.
• The lookback period is the only stated parameter and should reflect the chosen market and timeframe.
• The document supplies no backtest or evidence that the signals are profitable.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.